Transmeta Microprocessor Chip Business for Sale

Transmeta, the microprocessor chip maker that once challenged AMD and Intel, is up for sale, according to papers filed with the U.S. SEC (Securities and Exchange Commission). Transmeta once challenged Intel and AMD in the chip market, but the company has fallen on hard times and now relies on revenue from licensing processor chip patents and intellectual property, including the energy and power saving features of Transmeta's LongRun 2 microprocessor chip technology. Transmeta signed a new agreement with Intel to license more processor technology.

Transmeta, which once challenged Intel by producing a line
of low-power processors for desktops and notebooks, is putting itself up for
sale and is actively seeking a buyer for what remains of its intellectual property,
according to a new filing with the U.S. Securities and Exchange Commission.
While once known for its energy-efficient Crusoe processors,
Transmeta has moved away from chip design and now relies on revenues from its LongRun
and LongRun 2 technologies, which allow for dynamic control of the frequency,
voltage and transistor leakage within a microprocessor.

Transmeta wrote a letter to the SEC Sept. 24 to announce
that the company is now for sale. On the same day, Transmeta announced a
licensing agreement with Intel that will give the chip giant additional access
to Transmeta patents and intellectual property.

In 2007, Transmeta
settled a patent infringement lawsuit with Intel, which required Intel to
make a one-time $150 million payment to Transmeta plus annual $20 million
payments for the next five years. In the letter to the SEC this week, Transmeta
wrote that Intel will now accelerate those annual payments into a one-time settlement
of $91.5 million, which is due by the third quarter of 2008.
"This year, as a result of our successful licensing
activities, we will collect at least $265 million of cash payments for our
intellectual property and patents," Transmeta CEO
Les Crudele wrote. "We expect that our intellectual property portfolio and
licensing business, combined with our solid balance sheet, will be attractive
to potential bidders, and we look forward to conducting a timely process to
maximize value for our stockholders."
The SEC filing marks the end of what had been an innovative
chip company that 10 years ago looked to challenge Intel and Advanced Micro
Devices in the PC market.
Transmeta focused on low-power, x86-compatible processors that
would enhance the battery life of notebooks. While Transmeta was ahead of its competition,
its work spurred Intel to follow the same route when it created its laptop
platforms and more energy-efficient chips. Now, Intel
is moving ahead with a range of low-power processors, notably its Atom line
for both PCs and mobile Internet devices, or MIDs.
In 2005, with revenues falling and the company gaining
little traction and market share with its processors, Transmeta
shifted to selling its intellectual property to other chip companies. The
LongRun technologies seemed appropriate as the microprocessor industry shifted
from 90-nanometer processor to 65- and eventually 45-nm chips, and companies
needed to solve problems associated with power leakage from these smaller microprocessors.
In 2007, AMD
invested $7.5 million in Transmeta and Nvidia began licensing some of its
intellectual property earlier this year. At one time, Transmeta also had
agreements with Microsoft and Sony to help develop processors for those two
companies, but Transmeta's last annual report showed that it had scrapped those
programs because there was no revenue.
In the end, the revenues from Transmeta's intellectual
property were not enough to keep the company going and allow for additional
research into new power-efficient technologies, said John Spooner, an analyst
with Technology Business Research.
"The intellectual property they have is worth quite a bit,"
said Spooner. "It appears that Transmeta has reached a crossroads where they feel
it's better to become part of another company than stand on their own. They
may have reached the end of some of the projects that their engineers were
working on and now it's time to become part of another company in order to get
the funding they need to proceed with their work. They are focused on
delivering low-power technologies, but that is a very expensive proposition."
The question now is which chip makers might look to buy
Transmeta.
Right now, Intel is conducting a good deal of power-efficient research on its own and has already licensed the technology it needs.
AMD has invested in the company, but its own
troubled financial situation could mean that AMD
will stay out of the acquisition game for now.
If Intel and AMD do not
want to acquire Transmeta, another semiconductor company, such as Samsung or
Toshiba, might buy the chip maker. For example, Toshiba could use Transmeta's patents
to improve the power efficiency of its Cell chip.